Barclay v. Icon Health & Fitness, Inc.
| Decision Date | 27 July 2021 |
| Docket Number | File No. 19-cv-2970 (ECT/DTS) |
| Citation | 550 F.Supp.3d 710 |
| Parties | Teeda BARCLAY, Nicole Nordick, and Jay Ovsak, individually and on behalf of all others similarly situated, Plaintiffs, v. ICON HEALTH & FITNESS, INC. and NordicTrack, Inc., Defendants. |
| Court | U.S. District Court — District of Minnesota |
Karl L. Cambronne, Bryan L. Bleichner, and Christopher P. Renz, Chestnut Cambronne PA, Minneapolis, MN; Nathan D. Prosser, Hellmuth & Johnson, PLLC, Edina, MN; Wilbert B. Markovits, Terence R. Coates, and Justin C. Walker, Markovits, Stock & DeMarco, LLC, Cincinnati, OH, for Plaintiffs Teeda Barclay, Nicole Nordick, and Jay Ovsak.
X. Kevin Zhao, Lawrence M. Shapiro, and Aaron P. Knoll, Greene Espel PLLP, Minneapolis, MN, for Defendants Icon Health & Fitness Inc. and NordicTrack, Inc.
Jay Ovsak bought a NordicTrack treadmill and then signed up for an exercise app called iFit to use with it. When he signed up, iFit's Terms of Use did not include an arbitration provision, but they did allow the app to change the terms "without notice" to him, and they provided that his "continued use" of the site would constitute acceptance of any modified terms. The company later used this modification clause to add an arbitration provision to the Terms of Use.
In this lawsuit, Ovsak claims that Defendants—who sold him the treadmill—misrepresented the treadmill's continuous horsepower rating and that the misrepresentations caused him to pay more than he otherwise would have. Ovsak's two co-Plaintiffs, who raised similar claims, were previously ordered to submit their claims to arbitration. Defendants have now moved to compel arbitration of Ovsak's claims. The Parties primarily dispute whether Ovsak assented to the later-added arbitration clause and whether applying that arbitration clause to his claims would be unconscionable.
Defendants’ motion to compel arbitration will be denied. On two of the primary legal issues presented, Defendants have the better argument. As a matter of contract formation, Utah law (the applicable law in this case) appears to allow the unilateral-modification arrangement that Defendants used to add the arbitration clause to the iFit Terms of Use. And because the Parties agreed to delegate arbitrability questions to an arbitrator, it is inappropriate to decide here whether applying the arbitration clause to Ovsak's claims would be unconscionable. Nonetheless, the relevant Terms of Use provide that Jay could not assent to the updated Terms of Use that included the arbitration clause unless he used the iFit website or its downloadable applications after the clause was added on March 1, 2018. Defendants, who have the burden of proof, have not provided sufficient evidence to conclude that he did so. Because the Parties have already conducted discovery on these issues, no additional discovery will be ordered.
The prior order compelling arbitration in this case contains a description of Plaintiffs’ allegations and substantive claims. Order Compelling Arbitration at 2–8 ("October 15 Order") [ECF No. 53]. Plaintiffs have since filed a Third Amended Complaint, see ECF No. 80, but most of their factual allegations remain the same. This order will focus on the factual and procedural background relevant to the present motion.
The substantive claims in this case concern treadmills that Defendant ICON Health & Fitness, Inc.—"the world's largest manufacturer and marketer of fitness equipment"—sells under the NordicTrack brand. Third Am. Compl. ¶¶ 25–26. When it sells a treadmill, ICON allegedly represents that the treadmill can achieve a certain continuous horsepower rating, which is "a measurement of [a] motor's ability to maintain and continuously produce power over an extended period of time." Id. ¶ 38; see id. ¶¶ 47–58. According to Plaintiffs, the continuous horsepower ratings that ICON gives consumers are false. Id. ¶ 7. Defendants allegedly base their treadmills’ continuous horsepower ratings "on an inflated laboratory testing power draw (amperage) not possible in household use," id. ¶ 45, so when a treadmill is transferred to the household setting, it operates "well below" the represented rating, id. ¶¶ 7, 35.
Plaintiffs Teeda Barclay, Nicole Nordick, and Jay Ovsak purchased NordicTrack treadmills.1 Id. ¶¶ 16, 19, 22. Before doing so, each Plaintiff allegedly read content on NordicTrack's website describing the treadmill's continuous horsepower rating. Id. ¶¶ 17, 20, 23. Plaintiffs claim that Defendants’ representations regarding the treadmills’ continuous horsepower ratings were "a material factor" in their purchasing decisions and that they either "would not have purchased" their treadmill or would have paid less for it but for these misrepresentations. Id.
After purchasing their NordicTrack treadmills, each Plaintiff signed up for a membership with iFit, a "brand operated by ICON" that "connect[s] people with fitness coaches." Am. Brammer Decl. ¶ 3 [ECF No. 45]. "Many individuals [who] purchase NordicTrack treadmills also register for iFit memberships ... [to] access iFit's training support technology while they exercise." Id. ¶ 4. Barclay registered as an iFit member on June 18, 2019. Id. ¶ 17; Barclay Decl. ¶ 5 [ECF No. 38]. Nordick registered on March 4, 2019. Am. Brammer Decl. ¶ 16; Nordick Decl. ¶ 5 [ECF No. 39]. Any of the four possible registration methods available to Barclay and Nordick on those dates would have required them to "click a box" that read either "CREATE ACCOUNT," "PLACE ORDER," "START TRIAL," or "NEXT." Am. Brammer Decl. ¶¶ 8, 20–22. Adjacent to the box would have appeared a statement alerting the registrant that by clicking on the box, she agreed to the hyperlinked iFit "Terms of Use," among other contracts. Ovsak became an iFit member on March 25, 2016. Am. Brammer Decl. ¶ 15; see Jay Ovsak Decl. ¶ 6 [ECF No. 95]. He may have registered through iFit's mobile application, following the same process as Barclay and Nordick. See October 15 Order at 7. Or he may have registered through the iFit website, which would have required him to click a box that read, "Purchase for $X," where "X" was the purchase price. Am. Brammer Decl. ¶ 19, Ex. 9 [ECF No. 45-9]. Directly beneath the "Purchase for $X" button would have appeared a statement that read: Id. The phrases "Terms of Service" and "Privacy Policy" were both in blue font, and the Terms of Service phrase hyperlinked directly to the iFit Terms of Use in effect at that time. Id.
When Barclay and Nordick registered in 2019, the iFit Terms of Use included the following arbitration provision:
You acknowledge and agree that ICON may, at its sole discretion, require you to submit any disputes arising from the use of these Terms of Use or the ICON sites, including disputes arising from or concerning their interpretation, violation, invalidity, non-performance, or termination, to final and binding arbitration under the Rules of Arbitration of the American Arbitration Association applying Utah law.
Am. Brammer Decl., Ex. 7 at 9–10 ("January 2019 Terms of Use") [ECF No. 45-7]. These Terms of Use defined "ICON" to include "its[ ] affiliates, partners, licensors, subsidiaries, and/or related companies," id. at 1, and included a class-action waiver providing that an iFit member "may only resolve disputes with us on an individual basis" and not "as a plaintiff or a class member in a class, consolidated, or representative action," id. at 9.
When Ovsak registered in 2016, the then-effective Terms of Use contained no arbitration provision, but they did include a modification clause. See id. , Ex. 4 ("2015 Terms of Use") [ECF No. 45-4]. That modification clause provided:
We expressly reserve the right to change these Terms of Use from time to time without notice to you. You acknowledge and agree that it is your responsibility to review this site and these Terms of Use from time to time and to familiarize yourself with any modifications. Your continued use of this site after such modifications will constitute acknowledgment of the modified Terms of Use and agreement to abide and be bound by the modified Terms of Use.
Id. at 2. ICON later modified the Terms of Use that were in effect when Ovsak registered multiple times, and in March 2018, ICON added the arbitration provision in effect when Barclay and Nordick became iFit members. Id. , Ex. 6 at 10 ("2018 Terms of Use") [ECF No. 45-6]; compare with January 2019 Terms of Use at 9–10.
After several initial amendments not relevant here, Barclay, Nordick, and then-Plaintiff Erin Ovsak—Jay Ovsak's spouse—filed a Second Amended Complaint on March 16, 2020. ECF No. 22; see generally ECF Nos. 1, 21.2 (From here on, Erin and Jay will be referred to by their first names to minimize confusion.) On April 30, 2020, Defendants moved, as relevant here, to compel arbitration of all three Plaintiffs’ claims. ECF No. 28. On October 15, 2020, the motion to compel was granted in part and denied in part. October 15 Order at 40. The motion was granted with respect to Barclay and Nordick because, "[a]s a matter of law, [they] agreed to arbitrate disputes with Defendants." Id. at 24. Those two Plaintiffs were accordingly ordered "to submit their claims to arbitration." Id. at 40.3
The answer was more complicated for Erin because she never became an iFit member. And when Jay, her spouse, became an iFit member, the iFit Terms of Use did not contain an arbitration provision. That raised three questions: (1) whether Jay agreed to the Terms of Use in effect when he registered for iFit; (2) whether Jay was bound by the arbitration provision that ICON later added pursuant to the modification provision in those Terms of Use; and (3) whether Erin bound herself to the arbitration provision "by using the iFit service through Jay's membership." Id. at 26.
The October 15 Order resolved one of these questions but left the...
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